Two strategies, two philosophies. The avalanche method saves more money. The snowball method saves more people. You need to know which type of person you are before choosing one.
The Avalanche Method
Pay minimums on all debts. Put every extra dollar toward the highest interest rate debt first. When it's paid off, roll that payment to the next highest rate. Repeat.
The Snowball Method
Pay minimums on all debts. Put every extra dollar toward the smallest balance first. When it's paid off, roll that payment to the next smallest. Repeat.
A Concrete Example
Suppose you have:
- Credit Card A: $5,000 at 28% APR
- Student Loan: $12,000 at 6% APR
- Credit Card B: $2,000 at 22% APR
Avalanche order: Card A (28%) → Card B (22%) → Student Loan (6%)
Snowball order: Card B ($2k) → Card A ($5k) → Student Loan ($12k)
With $500/month of extra payment, avalanche saves you approximately $840 more in interest and finishes ~3 months sooner. But if you quit at month 8 on the avalanche because you haven't paid off a single debt yet — you've lost everything.
The Hybrid Approach
Start with the snowball: knock out your smallest debt for a fast win. Then switch to the avalanche. You get the psychological momentum of a quick victory plus the mathematical efficiency of rate-targeting. Most people who successfully pay off debt use this without realizing it.
The Real Enemy: Inertia
The most sophisticated debt payoff strategy is the one you execute. If you've been "planning" your debt payoff for more than a week, pick a method today — any method — and make your first extra payment this week. Optimization is for people who are already moving. Start moving.